[G.R. No. 61043. September 2, 1992.

DELTA MOTOR SALES CORPORATION, Plaintiff-Appellee, v. NIU KIM DUAN

and CHAN FUE ENG, Defendants-Appellants.

Francisco C. Bonoan for Plaintiff-Appellee.

Agapito M. Joaquin, for Defendants-Appellants.

SYLLABUS

1. CIVIL LAW; SALES; TREATMENT OF THE INSTALLMENT PAYMENTS AS RENTALS;

STIPULATION IN A CONTRACT THAT THE INSTALLMENTS PAID SHALL NOT BE
RETURNED TO THE VENDEE HELD VALID PROVIDED IT IS NOT UNCONSCIONABLE.
— Defendants-appellants cannot complain that their downpayment of P774.00 and
installment payments of P5,655.92 were treated as rentals — even though the total
amount of P6,429,92 which they had paid, approximates one-third (1/3) of the cost
of the three (3) air-conditioners. A stipulation in a contract that the installments
paid shall not be returned to the vendee is valid insofar as the same may not be
unconscionable under the circumstances is sanctioned by Article 1486 of the New
Civil Code. The monthly installment payable by defendants-appellants was P774.00.
The P5,655.92 installment payments correspond only to seven (7) monthly
installments. Since they admit having used the air-conditioners for twenty-two (22)
months, this means that they did not pay fifteen (15) monthly installments on the
said air-conditioners and were thus using the same FREE for said period — to the
prejudice of plaintiff-appellee. Under the circumstances, the treatment of the
installment payments as rentals cannot be said to be unconscionable.

2. REMEDIES OF THE VENDOR IN A SALE OF PERSONAL PROPERTY PAYABLE IN

INSTALLMENTS; REMEDIES ARE ALTERNATIVE AND NOT CUMULATIVE. — The
vendor in a sale of personal property payable in installments may exercise one of
three remedies, namely, (1) exact the fulfillment of the obligation, should the
vendee fail to pay; (2) cancel the sale upon the vendee’s failure to pay two or more
installments; (3) foreclose the chattel mortgage, if one has been constituted on the
property sold, upon the vendee’s failure to pay two or more installments. The third
option or remedy, however, is subject to the limitation that the vendor cannot
recover any unpaid balance of the price and any agreement to the contrary is void
(Art. 1484) The three (3) remedies are alternative and NOT cumulative. If the
creditor chooses one remedy, he cannot avail himself of the other two.

DECISION

NOCON, J.:
Elevated to this Court by the Court of Appeals, in its Resolution of May 20, 1982, on
a pure question of law, 1 is the appeal therein by defendants-appellants, Niu Kim
Duan and Chan Fue Eng assailing the trial court’s decision promulgated on October
11, 1977, 2 which ordered them to pay plaintiff-appellee, Delta Motor Sales
Corporation, the amount of P6,188.29 with a 14% per annum interest which was
due on the three (3) "Daikin" air-conditioners defendants-appellants purchased
from plaintiff-appellee under a Deed of Conditional Sale, after the same was
declared rescinded by the trial court. They were likewise ordered to pay plaintiff-
appellee P1,000.00 for and as attorney’s fees.chanrobles virtual lawlibrary

The events which led to the filing of the case in the lower court were summarized
by the Court of Appeals, as follows:jgc:chanrobles.com.ph

"‘On July 5, 1975, the defendants purchased from the plaintiff three (3) units of
‘DAIKIN’ air-conditioner all valued at P19,350.00 as evidenced by the Deed of
Conditional Sale, Exhibit A; that the aforesaid deed of sale had the following terms
and conditions:chanrob1es virtual 1aw library

‘(a) the defendants shall pay a down payment of P774.00 and the balance of
P18,576.00 shall [be] paid by them in twenty four (24) installments; (b) the title to
the properties purchased shall remain with the plaintiff until the purchase price
thereof is fully paid; (c) if any two installments are not paid by the defendants on
their due dates, the whole of the principal sum remaining unpaid shall become due,
with interest at the rate of 14% per annum: and (d) in case of a suit, the
defendants shall pay an amount equivalent to 25% of the remaining unpaid
obligation as damages, penalty and attorney’s fees; that to secure the payment of
the balance of P18,576.00 the defendants jointly and severally executed in favor of
the plaintiff a promissory note, Exhibit C; that the three (3) air-conditioners were
delivered to and received by the defendants as shown by the delivery receipt,
Exhibit B; that after paying the amount of P6,966.00, the defendants failed to pay
at least two (2) monthly installments; that as of January 6, 1977, the remaining
unpaid obligation of the defendants amounted to P12,920.08; that statements of
accounts were sent to the defendants and the plaintiff’s collectors personally went
to the former to effect collections but they failed to do so; that because of the
unjustified refusal of the defendants to pay their outstanding account and their
wrongful detention of the properties in question, the plaintiff tried to recover the
said properties extra-judicially but it failed to do so; that the matter was later
referred by the plaintiff to its legal counsel for legal action; that in its verified
complaint dated January 28, 1977, the plaintiff prayed for the issuance of a writ of
replevin, which the Court granted in its Order dated February 28, 1977, after the
plaintiff posted the requisite bond; that on April 11, 1977, the plaintiff, by virtue of
the aforesaid writ, succeeded in retrieving the properties in question: that as of
October 3, 1977, the outstanding account of the defendants is only in the amount
of P6,188.29 as shown by the computation, Exhibit F, after deducting the interests
in arrears, cover charges, replevin bond premiums, the value of the units
repossessed and the like; and, that in view of the failure of the defendants to pay
their obligations, the amount of P6,966.00 which had been paid by way of
installments were treated as rentals for the units in question for two (2) years
pursuant to the provisions of paragraph 5 of the Deed of Conditional Sale, Exhibit
A.’ (pp. 5-7, Record; pp. 4-6, Appellant’s Brief)." chanrobles law library

As above-stated, the trial court ruled in favor of Plaintiff-Appellee.

Defendants-appellants assail the Deed of Conditional Sale under which they

purchased the three (3) Daikin air-conditioners from plaintiff-appellee as being
contrary to law, morals, good custom, public order or public policy. In particular,
they point to the contract’s paragraphs 5 and 7 as iniquitous, which paragraphs
state that:jgc:chanrobles.com.ph

"5. Should BUYER fail to pay any of the monthly installments when due, or
otherwise fail to comply with any of the terms and conditions herein stipulated, this
contract shall automatically become null and void and all sums so paid by BUYER by
reason thereof shall be considered as rental and the SELLER shall then and there be
free to take possession thereof without liability for trespass or responsibility for any
article left in or attached to the PROPERTY:chanrob1es virtual 1aw library

x          x           x

"7. Should SELLER rescind this contract for any of the reasons stipulated in the
preceding paragraph, the BUYER, by these presents obligates himself to peacefully
deliver the PROPERTY to the SELLER in case of rescission, and should a suit be
brought in court by the SELLER to seek judicial declaration of rescission and take
possession of the PROPERTY, the BUYER hereby obligates himself to pay all the
expenses to be incurred by reason of such suit and in addition to pay the sum
equivalent to 25% of the remaining unpaid obligation as damages, penalty and
attorney’s fees;" 3

Defendants-appellants claim that for the use of the plaintiff-appellee’s three air-
conditioners, from July 5, 1975 4 to April 11, 1977, 5 or for a period of about 22
months, they, in effect, paid rentals in the amount of P6,429,92, 6 or roughly one-
third (1/3) of the entire price of said air-conditioners which was P19,350.00. They
also complain that for the said period the trial court is ordering them to pay
P6,188.29 as the balance due for the three air-conditioners repossessed.
Defendants-appellants were likewise ordered to pay P1,000.00 as attorney’s fees
when plaintiff-appellee never sought for attorney’s fees in its complaint. They
satirically pointed out that by putting "a few touches here and there, the same units
can be sold again to the next imprudent customer" 7 by plaintiff-appellee. Thus,
enforcement of the Deed of Conditional Sale will unjustly enrich plaintiff-appellee at
the expense of defendants-appellants.chanrobles law library : red

I
Defendants-appellants cannot complain that their downpayment of P774.00 and
installment payments of P5,655.92 8 were treated as rentals — even though the
total amount of P6,429,92 which they had paid, approximates one-third (1/3) of the
cost of the three (3) air-conditioners. A stipulation in a contract that the
installments paid shall not be returned to the vendee is valid insofar as the same
may not be unconscionable under the circumstances is sanctioned by Article 1486
of the New Civil Code. 9 The monthly installment payable by defendants-appellants
was P774.00. 10 The P5,655.92 installment payments correspond only to seven (7)
monthly installments. Since they admit having used the air-conditioners for twenty-
two (22) months, this means that they did not pay fifteen (15) monthly
installments on the said air-conditioners and were thus using the same FREE for
said period — to the prejudice of plaintiff-appellee. Under the circumstances, the
treatment of the installment payments as rentals cannot be said to be
unconscionable.

II

The vendor in a sale of personal property payable in installments may exercise one
of three remedies, namely, (1) exact the fulfillment of the obligation, should the
vendee fail to pay; (2) cancel the sale upon the vendee’s failure to pay two or more
installments; (3) foreclose the chattel mortgage, if one has been constituted on the
property sold, upon the vendee’s failure to pay two or more installments. The third
option or remedy, however, is subject to the limitation that the vendor cannot
recover any unpaid balance of the price and any agreement to the contrary is void
(Art. 1484) 11

The three (3) remedies are alternative and NOT cumulative. If the creditor chooses
one remedy, he cannot avail himself of the other two.chanrobles lawlibrary : rednad

It is not disputed that the plaintiff-appellee had taken possession of the three air-
conditioners, through a writ of replevin when defendants-appellants refused to
extra-judicially surrender the same. This was done pursuant to paragraphs 5 and 7
of its Deed of Conditional Sale when defendants-appellants failed to pay at least
two (2) monthly installments, so much so that as of January 6, 1977, the total
amount they owed plaintiff-appellee, inclusive of interest, was P12,920.08. 12 The
case plaintiff-appellee filed was to seek a judicial declaration that it had validly
rescinded the Deed of Conditional Sale. 13

Clearly, plaintiff-appellee chose the second remedy of Article 1484 in seeking

enforcement of its contract with defendants-appellants. This is shown from the fact
that its Exhibit "F" which showed the computation of the outstanding account of
defendants-appellants as of October 3, 1977 took into account "the value of the
units repossessed." 14 Having done so, it is barred from exacting payment from
defendants-appellants of the balance of the price of the three air-conditioning units
which it had already repossessed. It cannot have its cake and eat it too. 15

WHEREFORE, the judgment of the trial court in Civil Case No. 25578 is hereby SET
ASIDE and the complaint filed by plaintiff-appellee Delta Motor Sales Corporation is
hereby DISMISSED. No costs.

SO ORDERED.